– “A protracted administrative delay would not only prejudicially affect but also defeat substantive rights of the noticee. In certain circumstances, even a short delay can be intolerable not only to the department but also to the noticee. In such cases, the measure and test of delay would be required to be considered in the facts of the case.”
In a recent decision a division Bench of the Bombay High Court quashed a service tax notice issued after a span of 10 years.
The petitioner, Coventry Estates Pvt. Ltd, is a works contractor undertaking works in SEZ. It received a refundable deposit. Revenue termed it as advance and sought to levy service tax on it. Investigation started in 2009 and culminated into a show cause notice dated 16.03.2012. The petitioner filed a detailed reply on 24.01.2013. No action was taken by the revenue thereafter.
In the meantime, on 18.04.2015, the petitioner was amalgamated. A notice for personal hearing was sent after almost 10 years seeking to adjudicate the said show cause notice. The petitioner challenged such show cause notice and notice for personal hearing, inter alia, contending that delay in adjudication vitiates the proceedings.
The primary contention as canvassed by Bharat Raichandani, counsel for the petitioner is that there is no warrant for the adjudicating authority to adjudicate the show cause notice, after such long and unreasonable delay of more than 10 years, as the adjudication of the show cause notice after such inordinate delay is severely prejudicial to the rights of the petitioner.
The Counsel further contended that in the present case, there is nothing to indicate that the delay in any manner could be justified by the department. It is thus his submission that the adjudicating authority was bound by the principles of law to adjudicate the show cause notice within a reasonable period and as the delay in the present case is patently inordinate, the proceedings of show cause notice would be required to be dropped.
The Court of Justices Jitendra Jain and GS Kulkarni observed that “Merely for the reason that there was shifting of the Commissionerates and Re-Organisation of its office would be no reason to abdicate and/or not comply with the obligations under the Act to promptly and/or expeditiously adjudicate the show cause notice, to be taken to its logical conclusion.”
“In our opinion, the directions as made in such order are required to be read in the facts and circumstances of the case before the Court. It also cannot be said that any concrete proposition of law has been laid down in the said order to the effect that even if there exists a gross, unjustifiable and inordinate delay in adjudication of the show cause notice, the Revenue could nonetheless proceed to adjudicate the same” the Court said.
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